To solve the housing crisis, reform the green belt

In the 1980s, Margaret Thatcher set out to create a property-owning democracy in Britain. Of her many liberal reforms, few are more famous than the Right to Buy scheme which introduced, for the first time for many middle-class Britons, the prospect of property ownership.

By allowing tenants to purchase a council home and putting homeownership within reach of ordinary citizens, Right to Buy gave people not just an inheritable, appreciating asset and a measure of financial security, but a tangible stake in their country and in free-market capitalism itself. This policy demonstrates the very heart of what Thatcher’s neoliberal ideology set out to do – put power, decisions and wealth back in the hands of private individuals.

Today, however, property ownership is once again proving elusive for ordinary Britons. Since the 1990s, the real-terms cost of an average house in England (adjusted for inflation) has more than doubled. UK-wide, the typical home costs about five times average annual earnings; in London, it is ten times. Prices in the capital have reached almost parodic levels, with a modest, well-located flat going for the same amount as a listed country manor house.

The surging cost of housing has driven many people to long-term tenancy, which offers less financial security, is only marginally less expensive in the long-term, and does not provide an inheritable, appreciating asset.

And whereas in 1997 close to half of all households owned their home, today’s figure is less than 30 per cent. Private renting, meanwhile, has surged from 30 to 50 per cent. According to the Office for National Statistics, the average tenant in the UK spends more than a quarter of their salary on rent; in London, it’s nearly half.

While many culprits have been identified by observers from across the political spectrum, the fundamental problem comes down to simple supply and demand. As demand for houses in Britain – particularly in and around London – has surged in the past few decades, the available housing stock has remained stagnant. Since the financial crisis, the rate of housebuilding in the UK has floated between 100,000 and 150,000 per year. Even conservative estimates suggest that twice this rate would be required in order to meet present housing demand – rates not seen since the 1970s.

Under normal market conditions, an influx of demand should stimulate increased production from developers keen to cash in on high housing prices. The problem, however, is that housebuilding is strictly limited to certain areas. Although the United Kingdom is one of the least built-up countries in Europe – 90 per cent of land in England is undeveloped – large amounts of the land surrounding urban areas are designated as green belt and cannot be developed.

When the green belt was first envisioned in the 1930s, it was intended to curb urban sprawl and preserve environmentally important areas; the result, however, has been to squeeze urban areas, forcing them to densify and eliminating medium-density suburban areas that would be best-equipped to deliver middle-cost housing for middle and working-class households. Its effect has been to divide the country into high-density, high-cost urban areas and low-density rural areas.

Furthermore, though the green belt is often thought of as idyllic countryside, a living embodiment of William Blake’s “green and pleasant land”, the reality is much different. While some green belt land is indeed environmentally significant, roughly a third of the green belt is, in fact, used for intensive agriculture, which imposes a net environmental cost. Other areas simply consist of undeveloped dirt lots that cannot be built on under current laws – not exactly stunning pastoral landscapes.

Britain’s housing crisis has clear political and electoral ramifications. With rents eating up between a quarter to a half of people’s incomes, households have less money to spend on other expenses. The Conservative Party has failed to put forward an ambitious vision for housing reform and has largely abdicated the issue to Corbyn’s Labour Party, which has managed to rekindle interest in regressive policies such as rent controls and expansion of public housing. In order to regain credibility on the issue, the Conservatives will need to put forward a comprehensive, market-driven solution to increase the supply of housing.

Reforming the green belt offers a promising place to start. According to research by the Adam Smith Institute, London’s housing crisis could be eased by freeing up 3.7 per cent of the green belt within walking distance of a railway station, and this would result in one million new homes. Indeed, building on just 0.5 per cent of the green belt across the whole of England would result in two and a half million more homes – a measure would deliver much-needed middle-cost housing near urban areas with access to jobs without bulldozing over environmentally important lands.

In the longer term, removing green belt designation from agricultural land around urban areas would further help free up much-needed land for housebuilding. It is not necessary for agricultural land to be located right on the outskirts of major cities, but it is necessary for cities to be able to grow their economies and accommodate their workers. Allowing the agricultural land to be purchased by developers and moving farming operations further into the countryside would prove a much more efficient allocation of land resources.

At a time when socialism is creeping back into the political mainstream, riding on the coattails of the housing crisis, the Conservative Party must restore voters’ faith in economic liberalism by setting aside their dogmatic support for the green belt and offering a new, market-based solution to deliver the housing that people need at a price they can afford. With targeted planning reforms, Britain can meet its housing needs for this decade and beyond – without paving over her green and pleasant land.